Washington
A fight is brewing between college lobbyists and the Bush administration over a proposal that would require Congress to change the way it sets the maximum Pell Grant each year.

The plan, buried deep within President Bush's 2005 budget request, is meant to prevent lawmakers from allocating less money than is needed to cover the cost of Pell Grants in a given year. Administration officials say that doing so is essential to curtailing the growth of a shortfall in the program's budget.

"Our proposal would make the budgeting process for Pell Grants more credible," says Sally Stroup, the Education Department's assistant secretary for postsecondary education.

While college lobbyists agree that the goal sounds good, many of them worry that the proposal, if enacted, would remove lawmakers' flexibility in making spending decisions. As a result, the lobbyists say, the plan would make it harder for Congress to raise the maximum Pell Grant, currently at $4,050.

"This would tie the hands of appropriators and would once again leave behind low-income students," says Cynthia A. Littlefield, director of federal relations for the Association of Jesuit Colleges and Universities.

At issue is how best to deal with the shortfall, which has plagued the Pell Grant program for several years. The deficit, which has been caused mostly by an unexpected surge in demand for the grants, now stands at $3.7-billion. So far it has not directly affected Pell Grant recipients. Because the grants function like an entitlement, they are awarded to all eligible students, even if the program suffers financial losses.

Many higher-education lobbyists are urging policy makers not to get so caught up in trying to fix the shortfall that they shortchange the needs of low-income students. Increasing the maximum grant is especially important now, they say, at a time when public colleges are being forced to raise tuition sharply to make up for deep cuts in state spending.

"It's irresponsible to hold future students hostage to paying off the grants of their predecessors," says Becky Timmons, director of government relations at the American Council on Education.

But Bush-administration officials say the deficit in the Pell Grant program's budget cannot be ignored. They argue that if the shortfall's growth remains unimpeded, it would pose a threat to the program's long-term stability. "There is a point when the shortfall could get so large that we run out of money," says Thomas P. Skelly, director of budget services for the Education Department. "If we reached it, we might have to stop making awards."

That point is still far off, Mr. Skelly says. But it could be reached, he warns, if the program's deficit ever equals the amount of money that Congress has available to appropriate in a given year. Federal budget rules then would require the department to make deep cuts in the program or stop it altogether.

Placing Blame

While unexpected growth in demand for the grants has been the main cause of the shortfall, administration officials place at least some of the blame on Congress.

Lawmakers have routinely provided insufficient funds to cover the program's costs. Last month, for example, Congress approved a budget that would provide $12-billion for Pell Grants this year. That figure, according to the White House Office of Management and Budget, is $700-million short of what is needed to pay for the program.

The president's proposal is focused on trying to stop that practice. Under the plan, the House of Representatives and Senate subcommittees in charge of appropriations for the departments of Education, Labor, and Health and Human Services would be required to abide by government officials' estimates of the cost of keeping the maximum grant at its current level, or, if it is raised, the new level. Early each year, the Office of Management and Budget and the Congressional Budget Office make predictions about what the demand for Pell Grants will be and, given those projections, how much the program will cost.

For example, if the budget officials say it would cost $12.7-billion to maintain the $4,050 maximum grant, the leaders of the subcommittees would be obligated to allocate those funds to keep the top grant at that level. If the appropriators decided to provide less than that amount, they would have no choice but to reduce the maximum award or make cuts to other programs that fall under their jurisdiction, like spending for elementary and secondary education or the National Institutes of Health.

Bush-administration officials say that their proposal would bring honesty back to the budget-setting process. This "change would remove any incentive [for Congress] to appropriate less than the estimated program cost for the federal Pell Grant program, or to increase program costs (for instance, by increasing the maximum award) without providing the necessary budget authority," states an administration budget document.

It is unclear how much support the administration's idea will have in Congress. Typically, appropriators don't take kindly to proposals that reduce their flexibility to set budgets. While the Republican leaders of the appropriations committees have yet to take a position, their Democratic colleagues are blasting it.

"The administration's own budget requests have failed in recent years to accurately estimate annual Pell Grant program costs, and, thus, it is difficult to see how this proposal would solve the Pell Grant shortfall problem," Democratic staff members of the House Appropriations Committee wrote in an analysis they released on the President's 2005 budget request.

Backing Off

The administration's proposal actually represents a retreat by the Bush administration.

Over the past couple of years, it has been trying to restore the authority of Education Secretary Roderick R. Paige to reduce the size of the maximum Pell Grant set by lawmakers if the government does not have enough money to cover the increase.

Congress vested that power in the education secretary when it created the Pell Grant in 1972. During the program's first two decades of existence, the department used the authority occasionally. But lawmakers removed the power as part of the 2002 appropriations legislation for the Education Department. In that bill, they increased the maximum Pell Grant by $250, to $4,000, despite objections from the administration, which said the legislation did not include enough money to raise the top award.

"Congress basically wrote a check for $11.6-billion but deposited only $10.3-billion in the bank to cover it," William D. Hansen, then the deputy secretary of education, complained at the time. Lawmakers eventually provided an additional $1-billion, as part of an emergency spending bill, to pay for the increase.

Despite the administration's efforts, appropriators have refused to give "reductive spending" power back to the secretary. Administration officials say they did not ask for that authority this year because they never intended to use it in the first place. "We are committed to working with Congress to retire the shortfall without cutting student awards," the Education Department's Ms. Stroup says.

A Loss of Goodwill?

While college lobbyists agree that the new proposal is much better than the one allowing the secretary to reduce the size of the maximum award, most of them still argue that the president's plan could do great damage to the Pell Grant program.

Ms. Timmons of the ACE is particularly concerned that if the proposal is enacted it could "undermine the political goodwill and support" of lawmakers for the program. She notes that it costs almost $400-million to increase the maximum grant by $100. If lawmakers see "year in and year out that raising the maximum grant threatens to take money away from their other major priorities, such as cancer research, they will begin to despise the program," she says.

She also questions why Congress should rely on the government's predictions of future Pell Grant use to set the program's budget when it was faulty projections that got the program into the deficit it is in now. "I don't know why we would put so much faith into a flawed estimating process," she says.

But not all of Ms. Timmons's colleagues agree with her. A few college advocates say the administration should be praised for trying to stop the growth of the shortfall.

Patricia Smith, director of federal-policy analysis for the American Association of State Colleges and Universities and a budget official during the Clinton administration, says getting the program's deficit under control should be a top priority.

The shortfall has made it almost impossible for lawmakers and administration officials to raise the maximum grant, she says. The top award has remained at $4,050 for the past two years, and President Bush is asking Congress to keep it at that level once again for 2005.

While Ms. Smith says her association would not endorse the proposal until it learns more, she believes that "it may have merit."

"We ignore the shortfall at our peril if we want the Pell Grant program to retain its value at assisting low-income students," she says.